Deck 2: Choices and Trade-Offs in the Market

Question 1

The principle of opportunity cost is that _______.

A)in a market economy, taking advantage of profitable opportunities involves some money cost.
B)the economic cost of using a factor of production is the alternative use of that factor that is given up.
C)taking advantage of investment opportunities involves costs.
D)the cost of production varies depending on the opportunity for technological application.

Answer 1

the economic cost of using a factor of production is the alternative use of that factor that is given up.

Question 2

In a production possibility frontier model, a point ________ the frontier is productively inefficient.

A)along
B)inside
C)outside
D)at either intercept of

Answer 2

inside

Question 3

________ marginal opportunity cost implies that the more resources already devoted to any activity, the payoff from allocating yet more resources to that activity increases by progressively smaller amounts.

A)Increasing
B)Decreasing
C)Constant
D)Negative

Answer 3

Increasing

Question 4

What are the attainable production points on a production possibility curve?

A)The horizontal and vertical intercepts
B)The points along the production possibility frontier
C)The points outside the area enclosed by the production possibility frontier
D)The points along and inside the production possibility frontier

Question 5

What assumption is made by the production possibility frontier model?

A)Labour, capital, land and natural resources are unlimited in quantity.
B)The economy produces only two products.
C)Any level of the two products that the economy produces is currently possible.
D)The level of technology is variable.

Question 6

What is shown by the production possibility frontier model?

A)That if consumers decide to buy more of a product, its price will increase.
B)That a market economy is more efficient in producing goods and services than is a centrally planned economy.
C)That economic growth can only be achieved by free market economies.
D)That if all resources and current technology are fully and efficiently utilised, more of one good can be produced only by producing less of another good.

Question 7

What does a production possibility frontier with a bowed outward shape indicate?

A)The possibility of inefficient production
B)Constant opportunity costs as more and more of one good is produced.
C)Increasing opportunity costs as more and more of one good is produced.
D)Decreasing opportunity costs as more and more of one good is produced.

Question 8

Peter can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties.If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing an additional 15 neckties?

A)2 bow ties
B)15 bow ties
C)20 bow ties
D)35 bow ties

Question 9

If the production possibility frontier is ________, then opportunity costs are constant as more of one good is produced.

A)bowed out
B)bowed in
C)non-linear
D)linear

Question 10

How would the production possibility frontier be graphed if opportunity costs are constant?

A)As a ray from the origin
B)As a positively sloped straight line
C)As a negatively sloped curve bowed in toward the origin
D)As a negatively sloped straight line

Question 11

Scarcity________.

A)stems from the incompatibility between limited resources and unlimited wants.
B)can be overcome by discovering new resources.
C)can be eliminated by rationing products.
D)is a bigger problem in market economies than in socialist economies.

Question 12

Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves.If she now produces 60 silk roses and 80 silk leaves, the opportunity cost of producing an additional 10 silk roses is:

A)2)5 silk leaves.
B)10 silk leaves.
C)25 silk leaves.
D)55 silk leaves.

Question 13

Figure 2.1
Refer to Figure 2.1.Point C is:

A)technically efficient.
B)unattainable with current resources.
C)inefficient in that not all resources are being used.
D)the equilibrium output combination.

Question 14

Figure 2.1
Refer to Figure 2.1.Point A is:

A)technically efficient.
B)unattainable with current resources.
C)inefficient in that not all resources are being used.
D)the equilibrium output combination.

Question 15

Increasing opportunity cost is represented by a ________ production possibility frontier.

A)linear
B)bowed in
C)bowed out
D)vertical

Question 16

Figure 2.2
Refer to Figure 2.2.Steve Vignetto raises cattle and llamas on his land.His land is equally suitable for raising either animal.The graph in Figure 2-2 that represents his production possibility frontier is:

A)Graph A.
B)Graph B.
C)Graph C.
D)either Graph B or Graph C.

Question 17

What is true about the slope of a production possibility frontier?

A)It has no economic relevance or meaning.
B)It is always constant.
C)It is always varying.
D)It measures the opportunity cost of producing one more unit of a good.

Question 18

What points are outside the production possibility frontier?

A)Efficient
B)Attainable
C)Inefficient
D)Unattainable

Question 19

Figure 2.1
Refer to Figure 2.1.Point B is:

A)technically efficient.
B)unattainable with current resources.
C)inefficient in that not all resources are being used.
D)the equilibrium output combination.

Question 20

The production possibility frontier shows the ________ combinations of two products that may be produced in a particular time period with available resources and current technology.

A)minimum attainable
B)maximum attainable
C)only
D)equitable

Question 21

Table 2.1
Production choices for Tomaso's Trattoria
Refer to Table 2.1.Assume Tomaso's Trattoria only produces pizzas and calzones.Where would a combination of 36 pizzas and 30 calzones appear?

A)Along Tomaso's production possibility frontier
B)Inside Tomaso's production possibility frontier
C)Outside Tomaso's production possibility frontier
D)At the horizontal intercept of Tomaso's production possibility frontier

Question 22

What does an outward shift of a nation's production possibility frontier represent?

A)Economic growth
B)Rising prices of the two goods on the production possibility frontier model
C)An impossible situation
D)A situation in which a country produces more of one good and less of another

Question 23

Table 2.2
Production choices for Billie's Bedroom Shop
Refer to Table 2.2.Assume Billie's Bedroom Shop only produces pillows and blankets.A combination of 9 pillows and 14 blankets would appear________.

A)along Billie's production possibility frontier.
B)inside Billie's production possibility frontier.
C)outside Billie's production possibility frontier.
D)at the vertical intercept of Billie's production possibility frontier.

Question 24

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.A movement from Y to Z:

A)represents an increase in the demand for plastic products.
B)could occur because of general technological advancements.
C)is the result of advancements in food production technology.
D)is the result of advancements in plastic production technology.

Question 25

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.Consider the following events: a.an increase in the unemployment rate
b.a decrease in a nation's money supply
c.a war that kills a significant portion of a nation's population
Which of the events listed above could cause a movement from Y to W?

A)a, b and c
B)a and b only
C)a and c only
D)c only

Question 26

Table 2.2
Production choices for Billie's Bedroom Shop
Refer to Table 2.2.Assume Billie's Bedroom Shop only produces pillows and blankets.A combination of 9 pillows and 21 blankets would appear________.

A)along Billie's production possibility frontier.
B)inside Billie's production possibility frontier.
C)outside Billie's production possibility frontier.
D)at the vertical intercept of Billie's production possibility frontier.

Question 27

Without an increase in the supplies of factors of production, a nation can achieve economic growth________.

A)by producing more high-value goods and less of low-value goods.
B)through technological advancement which enables more output with the same quantity of resources.
C)by lowering the prices of factors of production.
D)by increasing the prices of factors of production.

Question 28

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.Consider the following events: a.a decrease in the unemployment rate
b.general technological advancement
c.an increase in consumer wealth
Which of the events listed above could cause a movement from V to W?

A)a only
B)a and b only
C)b and c only
D)a, b, and c

Question 29

Economic decline (negative growth)is represented on a production possibility frontier model by the production possibility frontier________.

A)shifting outward.
B)shifting inward.
C)becoming steeper.
D)becoming flatter.

Question 30

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.Consider the following events: a.a reduction in the patent protection period to no more than 2 years
b.a war that destroys a substantial portion of a nation's capital stock
c.the lack of a secure and enforceable property rights system
Which of the events listed above could cause a movement from W to V?

A)a only
B)a and b only
C)a and c only
D)a, b, and c

Question 31

Table 2.1
Production choices for Tomaso's Trattoria
Refer to Table 2.1.Assume Tomaso's Trattoria only produces pizzas and calzones.What type of opportunity costs does Tomasco face in the production of pizzas and calzones?

A)Increasing
B)Decreasing
C)Constant
D)Negative

Question 32

Table 2.1
Production choices for Tomaso's Trattoria
Refer to Table 2.1.Assume Tomaso's Trattoria only produces pizzas and calzones.Where would a combination of 24 pizzas and 15 calzones appear?

A)Along Tomaso's production possibility frontier
B)Inside Tomaso's production possibility frontier
C)Outside Tomaso's production possibility frontier
D)At the horizontal intercept of Tomaso's production possibility frontier

Question 33

A nation's production possibility frontier would shift outward from________.

A)discovering a cheap way to convert sunshine into electricity.
B)an increase in demand for the nation's products.
C)a decrease in the unemployment rate.
D)a law requiring workers to retire at age 50.

Question 34

Table 2.2
Production choices for Billie's Bedroom Shop
Refer to Table 2.2.Assume Billie's Bedroom Shop only produces pillows and blankets.Billie faces ________ opportunity costs in the production of pillows and blankets.

A)increasing
B)constant
C)decreasing
D)negative

Question 35

Figure 2.2
Refer to Figure 2.2.Steve Vignetto raises cattle and llamas on his land.A portion of his land is more suitable for raising cattle, and the other portion is better suited for raising llamas.Which of the graphs in Figure 2-2 represents his production possibility frontier?

A)Graph A.
B)Graph B.
C)Graph C.
D)Either Graph B or Graph C.

Question 36

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.A movement from X to Y:

A)could be due to a change in consumers' tastes and preferences.
B)could occur because of an influx of immigrant labour.
C)is the result of advancements in food production technology only, with no change in the technology for plastic production.
D)is the result of advancements in plastic production technology only, with no change in food production technology.

Question 37

Table 2.2
Production choices for Billie's Bedroom Shop
Refer to Table 2.2.Assume Billie's Bedroom Shop only produces pillows and blankets.Where would a combination of 5 pillows and 21 blankets appear?

A)Along Billie's production possibility frontier
B)Inside Billie's production possibility frontier
C)Outside Billie's production possibility frontier
D)At the vertical intercept of Billie's production possibility frontier

Question 38

An inward shift of a nation's production possibility frontier can occur due to________.

A)a reduction in unemployment.
B)a natural disaster like a hurricane or bad earthquake.
C)a change in the amounts of one good desired.
D)an increase in the labour force.

Question 39

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.Consider the following movements:
a.from point V to point W
b.from point W to point Y
c.from point Y to point Z
Which of the movements listed above represents economic growth?

A)a, b, and c
B)b and c only
C)a only
D)b only

Question 40

Table 2.1
Production choices for Tomaso's Trattoria
Refer to Table 2.1.Assume Tomaso's Trattoria only produces pizzas and calzones.Where would a combination of 24 pizzas and 30 calzones appear________.

A)along Tomaso's production possibility frontier.
B)inside Tomaso's production possibility frontier.
C)outside Tomaso's production possibility frontier.
D)at the horizontal intercept of Tomaso's production possibility frontier.

Question 41

The Great Depression of the 1930s, with a large number of workers and factories unemployed, would be represented in a production possibility frontier graph by:

A)a point inside the frontier.
B)a point outside the frontier.
C)a point on the frontier.
D)an intercept on either the vertical or the horizontal axis.

Question 42

Figure 2.5
Refer to Figure 2.5.What is the opportunity cost of moving to point B if the economy is currently producing at point A?

A)8 thousand wrenches
B)6 thousand hammers
C)30 thousand wrenches
D)23 thousand hammers

Question 43

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.Consider the following events: a.an increase in the unemployment rate
b.general technological advancement
c.a decrease in consumer wealth
Which of the events listed above could cause a movement from X to V?

A)a only
B)a and b only
C)b and c only
D)a, b, and c

Question 44

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.A movement from ________ could occur because of an influx of immigrant labour.

A)W to V
B)X to W
C)W to Z
D)Y to W

Question 45

According to the production possibility model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen?

A)Fewer goods will be produced for consumption today.
B)The production possibility frontier will be shifted inward in the future.
C)Future economic growth will decline.
D)The country's total production will fall.

Question 46

Figure 2.6 Figure 2.6 above shows the production possibility frontier for Vidalia, a nation that produces two goods, roses and orchids.
Refer to Figure 2.6.What is the opportunity cost of 80 dozen orchids?

A)0 roses
B)2)5 dozen roses
C)40 dozen roses
D)200 dozen roses

Question 47

If society decides it wants more of one good and all resources are fully utilised, then________.

A)it is unable to do this unless technology advances.
B)additional resource supplies will have to be found.
C)it has to give up some of another good and incur some opportunity costs.
D)more unemployment will occur.

Question 48

Figure 2.5
Refer to Figure 2.5.If the economy is currently producing at point D, what is the opportunity cost of moving to point B?

A)8 thousand wrenches
B)23 thousand hammers
C)30 thousand wrenches
D)0 hammers

Question 49

Jane can bake either a combination of 25 cakes and 15 pies or a combination of 10 cakes and 20 pies.If she now bakes 10 cakes and 20 Pies, the opportunity cost of baking an additional 15 cakes is:

A)5 pies.
B)10 pies.
C)15 pies.
D)20 pies.

Question 50

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.Consider the following movements:
a.from point V to point W
b.from point W to point Y
c.from point Y to point Z
Which of the movements listed above represents advancements in technology with respect to only plastic production?

A)a, b, and c
B)b and c only
C)b only
D)c only

Question 51

Suppose there is no unemployment in the economy and society decides that it wants more of one good.Which of the following statements is true?

A)It can only achieve this with an advance in technology.
B)It can increase output without giving up another good.
C)It can only achieve this with an increase in resource supplies.
D)It will have to give up production and consumption of some other good.

Question 52

Figure 2.4
Refer to Figure 2.4.If the economy is currently producing at point Y, the opportunity cost of moving to point W is:

A)2 million tonnes of steel.
B)zero.
C)9 million tonnes of paper.
D)16 million tonnes of paper.

Question 53

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.Consider the following events: a.a decrease in the unemployment rate
b.an increase in a nation's money supply
c.an influx of immigrant workers
Which of the events listed above could cause a movement from X to Z?

A)a and b only
B)a and c only
C)a only
D)c only

Question 54

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.Consider the following events: a.an increase in the patent protection period to 30 years
b.an increase of a nation's capital stock
c.an improved property rights system
Which of the events listed above could cause a movement from V to W?

A)a only
B)a and b only
C)a and c only
D)a, b, and c

Question 55

Figure 2.5
Refer to Figure 2.5.If the economy is currently producing at point E, what is the opportunity cost of moving to point D?

A)13 thousand hammers
B)10 thousand hammers
C)8 thousand wrenches
D)0 wrenches

Question 56

Figure 2.5
Refer to Figure 2.5.If the economy is currently producing at point C, what is the opportunity cost of moving to point B?

A)10 thousand wrenches
B)13 thousand hammers
C)30 thousand wrenches
D)23 thousand hammers

Question 57

What is the opportunity cost of taking a semester long economics class?

A)The cost of tuition and fees only
B)The value of the time spent in the classroom.
C)Zero because there is no admission charged if you are enrolled in the course.
D)Equal to the highest value of an alternative use of the time and money spent on the class.

Question 58

Figure 2.5
Refer to Figure 2.5.If the economy is currently producing at point E, what is the opportunity cost of moving to point B?

A)13 thousand hammers
B)10 thousand hammers
C)30 thousand wrenches
D)0 wrenches

Question 59

Figure 2.4
Refer to Figure 2.4. If the economy is currently producing at point X, the opportunity cost of moving to point Y is:

A)5 million tonnes of steel.
B)9 million tonnes of paper.
C)5 million tonnes of paper.
D)14 million tonnes of steel.

Question 60

Figure 2.3 Figure 2.3 shows various points on three different production possibility frontiers for a nation.
Refer to Figure 2.3.A movement from ________ is the result of negative technological change in plastic production.

A)V to X
B)X to W
C)W to Z
D)Z to Y

Question 61

If a country is producing efficiently and is on the production possibility frontier, the only way to produce more of one good is to produce less of the other.

Question 62

Suppose your expenses for this term are as follows: tuition: $10 000, room and board: $6000, books and other educational supplies: $1000.Further, during the term, you can only work part-time and earn $8000 instead of your full-time salary of $20 000.What is the opportunity cost of going to university this term, assuming that your room and board expenses would be the same even if you did not go to university?

A)$11 000
B)$17 000
C)$23 000
D)$29 000

Question 63

On a diagram of a production possibility frontier, opportunity cost is represented by the production possibility frontier shifting outward.

Question 64

If additional units of a good could be produced at a constant opportunity cost, the production possibility frontier would be bowed outward (concave).

Question 65

A decrease in population shifts the production possibility frontier outwards over time.

Question 66

Figure 2.6 Figure 2.6 above shows the production possibility frontier for Vidalia, a nation that produces two goods, roses and orchids.
Refer to Figure 2.6.What is the opportunity cost of 100 dozen roses?

A)0)8 dozen orchids
B)5 dozen orchids
C)40 dozen orchids
D)80 dozen orchids

Question 67

Table 2.3
Production Choices for Dina's Cafe
Refer to Table 2.3.Assume Dina's Cafe only produces sliders and hot wings.A combination of 80 sliders and 50 hot wings would appear________.

A)along Dina's production possibility frontier.
B)inside Dina's production possibility frontier.
C)outside Dina's production possibility frontier.
D)at the vertical intercept of Dina's production possibility frontier.

Question 68

Table 2.3
Production Choices for Dina's Cafe
Refer to Table 2.3.Assume Dina's Cafe only produces sliders and hot wings.A combination of 80 sliders and 100 hot wings would appear________.

A)along Dina's production possibility frontier.
B)inside Dina's production possibility frontier.
C)outside Dina's production possibility frontier.
D)at the vertical intercept of Dina's production possibility frontier.

Question 69

A decrease in the unemployment rate may be represented as a movement from a point on the production possibility frontier to a point outside the frontier.

Question 70

Any output combination along a production possibility frontier is associated with fully utilised resources.

Question 71

If additional units of a good could be produced at an increasing opportunity cost, the production possibility frontier would be linear.

Question 72

What is the opportunity cost of going to an outdoor music festival?

A)The enjoyment you receive from going to the festival.
B)The value of the time spent at the festival.
C)Equal to the highest value of an alternative use of the time and money spent on the festival.
D)Zero because there is no overhead costs for an outdoor festival.

Question 73

Table 2.3
Production Choices for Dina's Cafe
Refer to Table 2.3.Assume Dina's Cafe only produces sliders and hot wings.A combination of 120 sliders and 100 hot wings would appear________.

A)along Dina's production possibility frontier.
B)inside Dina's production possibility frontier.
C)outside Dina's production possibility frontier.
D)at the vertical intercept of Dina's production possibility frontier.

Question 74

Any output combination outside a production possibility frontier is associated with unused or underutilised resources.

Question 75

An increase in the unemployment rate may be represented as a movement from a point on the production possibility frontier to a different point on the frontier.

Question 76

Table 2.3
Production Choices for Dina's Cafe
Refer to Table 2.3.Dina faces ________ opportunity costs in the production of sliders and hot wings.

A)increasing
B)decreasing
C)constant
D)negative

Question 77

If a country is producing efficiently and is on the production possibility frontier, the country can produce more of one good without producing less of the other good.

Question 78

An increase in the labour force shifts the production possibility frontier inwards over time.

Question 79

Figure 2.6 Figure 2.6 above shows the production possibility frontier for Vidalia, a nation that produces two goods, roses and orchids.
Refer to Figure 2.6.Suppose Vidalia is currently producing 60 dozen orchids per period.How many roses is it also producing, assuming that resources are fully utilised?

A)40 dozen roses
B)50 dozen roses
C)60 dozen roses
D)100 dozen roses

Question 80

Figure 2.6 Figure 2.6 above shows the production possibility frontier for Vidalia, a nation that produces two goods, roses and orchids.
Refer to Figure 2.6.Suppose Vidalia is currently producing 120 dozen roses per period.How many orchids is it also producing, assuming that resources are fully utilised?

A)20 dozen orchids
B)32 dozen orchids
C)44 dozen orchids
D)68 dozen orchids